PCCW bets on local content to increase pay-TV unit's growth

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PCCW, the city's largest telecommunications firm, is expanding its pay-television business to include more local content as it seeks to maintain growth momentum in the second half of the year, group managing director Alex Arena said.

PCCW announced on Thursday that its core telecommunications business posted growth of 10 per cent in earnings before interest, tax, depreciation and amortisation in the first half to HK$3.36 billion while revenue increased 13 per cent to HK$10.75 billion.

Its Now TV unit was one of the growth engines in the first six months of the year as the company benefited from the return of exclusive broadcasting rights for the English Premier League football matches in August last year.

The company recorded a 13 per cent increase in the number of Now TV users to 927,000 in the first half while those willing to pay for premium content rose 19 per cent to 668,000 subscribers, up from 560,000 a year earlier.

Users paid on average HK$213 per month, compared with HK$166 in the year-ago period.

Mr Arena expected the amount each user paid would continue to increase as the company encouraged existing customers to sign up for higher tariff packages when they renewed contracts.

Now TV surpassed rival i-Cable Communications as Hong Kong's biggest pay-television operator in the first half.

Now TV generated revenue of HK$1.04 billion in the reported period, compared with i-Cable, which only had HK$699 million in revenue from the pay-television business with 892,000 subscribers.

'We are now aggressively attacking the mass market and the number of subscribers continues to grow strongly,' Mr Arena said.

Now TV has targeted the middle and upper-income groups since it was launched in 2003.

It said the new integrated set-top box for high-definition television, which provided a clearer and richer picture, and digital terrestrial television broadcasts services were successfully tapping the mass market.

Although the telecommunications firm had made further investments into high-definition content and mass-market programmes, the pay-television business still made a loss before interest, tax, depreciation and amortisation of HK$40 million, falling short of analysts' estimates that it would make a positive contribution in the first half.

'The break-even date for Now TV will be pushed back further due to the recent launch of the high-definition service,' Lehman Brothers analyst Danny Chu wrote in a research report yesterday.

Goldman Sachs analyst Kathy Chen Pei-hui said: 'There is risk that the television and content business will not be able to break even on an ebitda basis this year.'

Nomura International's analyst Kelvin Ho also suspected that Now TV's break-even target had been deferred to next year.